Capex increased by 27% to combat input cost inflation and enhance vertical integration
Mumbai, March 2025 – Asian Paints has escalated its investment in Gujarat’s Dahej chemical complex by ₹690 crore taking the total project outlay to ₹3,250 crore as approved by its board. This strategic move strengthens India’s first fully integrated paint chemicals facility while addressing global supply chain challenges.
Project Deep Dive: What’s Changing
💰 Revised Financials
• Initial Budget: ₹2,560 crore
• Additional Capex: ₹690 crore (27% increase)
• New Total: ₹3,250 crore
📌 Cost Drivers
- Pre-operative expenses for tech transfers
- Ethylene storage infrastructure enhancement
- Inflation in specialty equipment imports
Why This Polymer Plant Matters
🎨 Vertical Integration Benefits
| Material | Current Import % | Post-Plant Self-Sufficiency |
|---|---|---|
| VAM | 68% | 85% |
| VAE | 72% | 90% |
🌍 Strategic Advantages
- Import Substitute: Cuts $220 million annual chemical imports
- Tech Edge: First Indian plant with dual VAM/VAE production
- Green Focus: 30% lower carbon footprint than imported equivalents
Operational Timeline
🛠️ Q2 2025: Mechanical completion
🧪 Q4 2025: Trial production begins
🏭 Q1 2026: Commercial operations
Management Commentary
Amit Syngle, MD & CEO:
“This isn’t just cost escalation – we’re adding advanced process controls that’ll give us 15% yield improvement over European plants.”
CFO Addendum:
“The capex revision maintains our 22-24% ROCE target despite inflationary pressures.”
Industry Impact
✅ Paint Makers: Berger, Kansai may follow suit with backward integration
✅ Chemical Suppliers: Domestic ethylene derivatives demand to jump 40%
✅ Logistics Players: Dahej port activity to increase with 200,000 MT annual output
Investor Perspective
📈 Margin Protection: In-house polymers to save 3-5% on raw material costs
🛡️ Supply Security: Mitigates geopolitical risks in chemical imports
🌱 ESG Plus: Local production reduces Scope 3 emissions by 18%
Market Reaction: Asian Paints shares up 1.8% post-announcement
Dahej Cluster Advantage
• Proximity to Reliance’s ethylene pipeline
• GST benefits under Gujarat’s chemical policy
• Skilled labor pool from nearby GIDC estates
Optimized for Stakeholders
🔬 Technical Insight: VAM/VAE application in premium paints
📉 Cost Analysis: Breakdown of capex drivers
🌐 Global Context: Compare with BASF’s China VAM facility
